Larvel Bunker and her daughters Sophia, 8, and Mikaela, 6, live in St. Paul's Como neighborhood and shop twice a month at the St. Louis Park Costco. Bunker said they're excited for the
retailer's Maplewood location to open in July or August. The 158,000-square-foot store will include a tire center, liquor store and gas station.

The Costco warehouse club in St. Louis Park is one of the chain's five Twin Cities locations. Its Maplewood store, coming in summer, may be the first of several in the east metro.

Larvel Bunker drives from her Como neighborhood in St. Paul twice a month to Costco Wholesale in St. Louis Park to stock up on groceries for her family of four. “We like their prices,” she said.

Soon, she’ll be able to find a store much closer to home for the eggs, sausages and fresh fruit she loaded into her cart last week. The Issaquah, Wash., retailer that’s doing gangbuster business while many chains are suffering is building its first east-metro warehouse club, in Maplewood. It’s set to open in July or August and will be the fifth Costco in the Twin Cities.

“We can’t wait,” said Bunker, who recently pushed a cart through the St. Louis Park warehouse with her daughters Sophia, 8, and Mikaela, 6.

When it comes to rock-bottom prices, customer service and picking brand-name merchandise customers want to buy, Costco is the best of the best in the wholesale-club sector, retail observers say. Besides selling everything from eggs, milk and fruit to electronics, furnishings and gas, Costco is also known for treating employees decently.

“This is one of the great retail companies in the history of this country,” said Howard Davidowitz, chairman of Davidowitz & Associates Inc., a national retail consulting and investment banking firm in New York.

In the otherwise struggling retail sector, wholesale clubs such as Costco, Sam’s Club and BJ’s are profiting from customers squeezed by rising food and fuel prices. Costco, which reported $64.4 billion in revenue for the last fiscal year, has higher sales per square foot on average than Sam’s or BJ’s.

Costco’s sales at stores open at least a year consistently have posted increases, mostly in the 6 percent to 9 percent range, including an 8 percent spike in April. By contrast, Wal-Mart stores saw a 3.2 percent increase in April, while Target reported a 3.1 percent rise. Costco stock reflects its success: Shares are up 30 percent in the past year, compared with a 19 percent rise for Wal-Mart and an 11 percent decline for Target shares.

“The bottom line is, right now in this country, the membership warehouse clubs are the only category which has seen consistent growth and positive sales in the first five months of this year,” said Britt Beemer, who tracks consumer behavior with Charleston, S.C.-based America’s Research Group. “That to me is amazing.”

Costco also appeals to the high end, even inspiring a New York Times story in November about its elite fans. “You walk into the Costcos and Sam’s of the world, and you’re buying Smithfield bacon and all the brands you love,” Beemer said. Costco even has become the country’s biggest retailer of wine, according to ACNielsen, an Illinois-based marketing information company.

While the deals are real, Costco might not be as appealing to bachelors.

Eggs were a bargain but came in a pack of 36 for $3.49 last week at the St. Louis Park store. That’s $1.16 a dozen, while a dozen eggs retailed for around $2.29 from a local grocer and at a national average of $2.20 in March, the most recent statistic available from the U.S. Department of Agriculture.

Costco makes money by charging membership fees that vary but start at $50. The warehouse club has about 52 million members. Experts say Costco’s gross margins are in the 12 percent to 13 percent range, so the chain pockets very little profit on goods after paying the costs of operations. Discounters, by contrast, are believed to have 25 percent to 30 percent gross margins.

A typical Costco offers far less variety, with 4,000 items versus 40,000 to 60,000 at typical grocery stores and discounters, keeping the chain’s inventory expenses low. Retail observers say the chain’s buyers are masters of the craft, knowing exactly what their customers will go for.

It helps that company co-founder James Sinegal remains as Costco’s president and chief executive. “The Sam Walton of Costco is still out there, working six days a week and visiting stores,” Davidowitz said, referring to the Wal-Mart founder.

Costco has 536 stores worldwide. Its Twin Cities locations include St. Louis Park, Eden Prairie, Coon Rapids and Maple Grove. It re-entered the Twin Cities market in 2000 with the St. Louis Park store after pulling out a decade earlier, having expanded too rapidly. Sam’s Club, the warehouse-club offshoot of Bentonville, Ark.-based Wal-Mart, has nine locations in the Twin Cities. Massachusetts-based BJ’s has stores throughout the East Coast but no Minnesota presence.

Costco is building the 158,000-square-foot Maplewood store at the former Country View Golf Course site on the north side of Beam Avenue and west side of Bruce Vento Trail. It will have a tire center, liquor store and gas station.

Meanwhile, Costco is still scouting for three to five other Twin Cities locations, mostly in the east metro, a store manager had said. Real estate observers say Woodbury is a prime location that Costco’s been trying to get into and that the south suburbs also are appealing.

As many retailers downsize expansion plans, Bob Nelson, Costco’s vice president of finance and investor relations, said the chain plans to continue building 25 to 35 new warehouse clubs a year, though Maplewood is its only definite additional Twin Cities location.

When the store opens this summer, competitors such as Cub and Target may feel the effects.

“The typical store did about $128 million (in sales),” said David Brennan, co-director of the Institute for Retailing Excellence at the University of St. Thomas. “That’s about $1,000 a square foot. That’s more than twice the average Wal-Mart Supercenter.”

Bunker, the Costco enthusiast who lives in the Como neighborhood, predicted her shopping habits will be altered when the Maplewood Costco opens. One change: She’ll skip her supplemental trips to SuperTarget in Roseville.

“We were so psyched about the Roseville (Costco), and we were disappointed when that didn’t come through,” Bunker said, referring to the failed attempt to open at the Twin Lakes redevelopment, “but the Maplewood store is just as good for us.”

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